Protecting America's Innovative Advantage

Tuesday, April 26, was World Intellectual Property Day. The theme of this year's celebration -- Designing the Future -- emphasized the critical role that ideas play in the development of solutions to the challenges of the 21st century, such as combating climate change, enhancing agricultural productivity, and finding cures for medical ailments.

From California's Silicon Valley to Texas' Clean Energy Incubator to the Biotech Beltway around Washington, D.C., the United States is the world leader in innovative products and services. The continued competitive strengths of our innovative sectors lie in the ongoing generation of new ideas, new products, new services, and new business models.

Sustaining innovation, however, requires an environment in which the knowhow, proprietary information and technologies, copyrights, patents, and other forms of intellectual property (IP) created by innovators are protected from piracy, counterfeiting, forced transfers and other harmful measures both at home and abroad.

American workers have a legitimate right to benefit from their hard work and talents. American companies have a similar right to benefit from their investments of financial and human capital. And American researchers, scientists, entertainers, and entrepreneurs have a right to benefit from their inventions and creative products. This is why robust laws and enforcement measures to protect IP and implementation of fair innovation policies around the world are priorities for all of us -- business, labor, academia, and government.

IP theft hurts everyone. Counterfeits today include movies, music, software, and fashion. They also include fake pharmaceuticals, fake automotive brakes and tires, and even fake airplane parts. Producers of genuine items or services inevitably lose sales and, as a consequence, workers lose their jobs. Consumers and their families are at risk because counterfeit products are by their very nature unregulated and thus, in many cases unsafe. And governments lose tax revenue. The value of American IP is estimated to be over $5 trillion; hence, IP theft also threatens America's economic security. Unless we act quickly, the harm to our economy in terms of American exports, jobs, and our ability to innovate will continue to worsen.

In March 2010, President Obama set an ambitious goal of doubling U.S. exports in five years to support two million new American jobs. In order to increase net exports and promote high-quality, high-paying job growth at home, we must protect America's greatest asset -- our creativity and ability to innovate. Our economic recovery and capacity to create jobs is increasingly dependent on the exports of IP-intensive industries -- such as medical equipment, entertainment products, computers and electronics, and information software. These businesses have accounted for 60 percent of U.S. exports in recent years.

According to the World Trade Organization, the United States ranks third in world merchandise exports, just behind Germany and China. However, factoring in services exports, such as research and development and computer services, U.S. exports have a higher value than any other country, totaling $1.5 trillion in 2009. IP-intensive goods and services are America's strongest competitive advantage.

Countless American jobs can be attributed to the ideas and innovations of our companies and citizens. Innovative industries employ over 18 million Americans and produce jobs at all skill levels. On average, IP-intensive industry employees earn almost 1.6 times more than their counterparts in non-IP-intensive industries. But to create new jobs in industries such as information technology, movies, pharmaceuticals, and clean technology we need to protect incentives to innovate.

IP is the global currency of innovation. Without adequate safeguards there is little or no incentive for companies to commit large sums of capital or creative energy to new products or services. Copyrights, trademarks, patents, and trade secrets support creativity, entrepreneurship and innovation -- key drivers of domestic and global economic growth. A World Bank study of 92 countries over the period of 1960-2000 found that a 20 percent increase in the annual number of patents granted was associated with an increase of 3.8 percent in output. The direct issuance of patents, fostered and protected by stronger IP rights regimes, stimulates economic growth.

American IP and, consequently, exports and jobs are threatened not only by piracy but also certain foreign government policies that would force innovative companies to develop and register IP in their markets as a precondition of doing business with their government entities. China's proposed indigenous innovation requirements are an example of such policies. China agreed that it would not link its innovation polices to government procurement preferences during President Hu Jintao's visit to the United States in January. Implementation of this commitment is critical given that more than half of American high-tech companies surveyed by the American Chamber of Commerce in China reported that indigenous innovation requirements would negatively impact their businesses in the region once the policy was fully implemented. While we have focused on China here, it is important to emphasize that adherence to non-discriminatory innovation policies and IP enforcement improvements are necessary in many other nations as well.

Jobs, exports, and innovation are all connected to one another and to IP development. This is why we are encouraging and indeed insisting that all nations take tough positions against the theft of IP and reject policies that force foreign businesses to transfer their rights IP as a condition for doing business in a new market. The future of our economy and millions of American jobs depend on the vigorous protection of IP -- which is why this is a top economic and, increasingly, foreign policy priority for us.

by Robert D. Hormats, Under Secretary of State for Economic, Energy and Agricultural Affairs
Richard L. Trumka, President of the AFL-CIO
Deborah L. Wince-Smith, President and CEO of the Council on Competitiveness